The Honorable Michael K. Powell
Federal Communications Commission
445 12th Street, S.W.
Washington, DC 20554
Re: In the Matter of 2000 Regulatory Review, Spectrum Aggregation Limits for Commercial Mobile Radio Services, WT Docket No. 01-14
Dear Chairman Powell:
On behalf of the Administration, I am writing to urge the Commission to repeal its commercial mobile radio service (CMRS) spectrum aggregation limits (the "spectrum cap") and cellular cross-interest rules, which are being revisited as part of the Commission's 2000 biennial review.(1) The Telecommunications Act of 1996 requires the Commission to repeal or modify regulations no longer necessary in the public interest.(2) In today's CMRS market, characterized by multiple national providers and numerous local carriers, rules such as these that draw arbitrary lines in the name of ensuring competition are simply not needed. While the rules may have served a purpose when the Commission was first licensing cellular and personal communications service (PCS) providers and initially creating a competitive market for CMRS, these rules are no longer necessary to preserve established competition. Indeed, their retention will more likely result in consumer harm. The rules' arbitrary constraints on system capacity limit service availability as well as stifle the deployment of innovative new offerings on the CMRS networks.(3) For these reasons, we join in urging full and immediate repeal of the rules.(4)
There is broad agreement that the CMRS marketplace is highly competitive in all major markets and has grown remarkably since its inception in the early 1980s. This growth is well documented. Almost 125 million Americans now have wireless phones. Consumers recognize no fundamental differences among cellular, PCS, and Nextel-like services. For consumers, all of these carriers compete head-to-head. As a result, most metropolitan areas have more than four CMRS carriers competing vigorously against each other and many have more than six. Perhaps more significantly, the CMRS market as a whole is characterized by multiple large national players, along with many robust local players.(5)
Clearly, today's CMRS market is very different from the way the market looked when the rules were first adopted, or even when the rules were last reviewed. Today, virtually all of the spectrum allocated to the cellular, PCS, and enhanced SMR services has been assigned and the systems licensed for them have been substantially, if not fully, built-out. This differs sharply from the picture of the market when the rules were first adopted.(6) At that time, competition - if it existed - was in the form of a duopoly. Even just a few years ago, some spectrum blocks were still being auctioned and construction of many systems had not yet been completed or even started. In these earlier landscapes, the rules arguably served a purpose in ensuring the development of multiple competitors, rather than allowing early entrants to acquire spectrum and prevent the development of robust competition. There is a vast difference, however, between having bright line rules in place to ensure the formation of competition in a nascent market and maintaining those rules as an arbitrary constraint on marketplace forces after vigorous competition develops.
Further, removal of the rules will not leave the CMRS market exposed and susceptible to anti-competitive behavior or harmful consolidation. As many commenters in this proceeding have recognized, the Department of Justice (DOJ) and the Commission both have mechanisms in place for reviewing and addressing potentially anti-competitive consolidation. Indeed, as the primary enforcer of the antitrust laws, the DOJ routinely reviews communications transactions for harmful competitive effects. The Commission engages in a similar analysis when it reviews proposed transactions for consistency with the public interest. These safeguards are more than sufficient to protect against future anti-competitive conduct or consolidation that threatens the public interest.
By itself, the foregoing rationale provides ample basis for finding both the spectrum cap and cellular cross-interest regulations "no longer necessary in the public interest as the result of meaningful economic competition between providers" of telecommunications service,(7) and thus subject to repeal. However, the case for repeal here is even more compelling. As made plain by several of the commenters, (8) continued retention of the rules will likely have increasingly detrimental effects on consumers. As the Commission is aware, the current CMRS allocations as limited by the rules at issue are increasingly capacity constrained, particularly in urban areas. In such an environment, the quality of existing services will necessarily be decreased and the delivery of new services will be discouraged. With respect to existing services, this means much more difficulty in getting a call through. In times of unusually large call volume, like during a large-scale public emergency such as we saw on September 11, 2001, system capacity has no room to expand and the system becomes virtually unusable for many callers.
With respect to new services, the limits set by the rules discourage the offering of innovative new services over existing CMRS networks. New offerings, like the faster web surfing capabilities of 2.5G, could be rolled out on today's CMRS networks. However, given current system saturation levels and the fact that such new services tend to require more spectrum than traditional services, many carriers are discouraged from doing so. Repeal of the rules could remove these arbitrary capacity constraints, allowing CMRS carriers to better serve their customers though more reliable call completion and the delivery of new services.
For the foregoing reasons, the Administration supports complete and immediate repeal of the CMRS spectrum aggregation and cellular cross-interest rules. Given the current vigorous level of competition in the CMRS marketplace, the existence of other mechanisms to safeguard against anti-competitive activity and detrimental consolidation, and the potential consumer harms if the rules are left in place, prompt repeal is not only warranted but required. Thank you for your consideration of these views.
Nancy J. Victory
cc: The Honorable Kathleen Q. Abernathy
The Honorable Michael J. Copps
The Honorable Kevin J. Martin
Thomas J. Sugrue, Chief, Wireless Telecommunications Bureau
1. In the Matter of 2000 Biennial Regulatory Review, Spectrum Aggregation Limits for Commercial Mobile Radio Services, WT Docket No. 01-14, Notice of Proposed Rulemaking, 16 FCC Rcd 2763 (2001) ("NPRM").
2. 47 U.S.C. section 161.
3. Although most commenters have focused on the spectrum cap rule, which limits the amount of CMRS spectrum in which a carrier may have an interest in within a geographic area, NTIA believes that the same factors support repeal of the cross-interest rule as well. This rule limits parties from having an interest in both cellular carriers within the same geographic area.
4. See, e.g., letter of Reps. W.J. Billy Tauzin, Chairman, House Committee on Energy and Commerce, and Fred Upton, Chairman, House Subcommittee on Telecommunications and the Internet, dated October 10, 2001.
5. See, e.g., Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services, Sixth Report, FCC 01-192 (2001), 16 FCC Rcd 13350 at 13362.
6. The cellular cross-interest rule was adopted in 1991, prior to the licensing of PCS services, and the 45 MHz spectrum cap rule was first adopted in 1994 and later modified. See, NPRM, supra note 1, at 2768 and 2765 respectively.
7. 47 U.S.C. section 161(a).
8. See, e.g., comments of the Cellular Telecommunications and Internet Association (filed April 13, 2001).